Mistakes versus Preferences in Economic Games

In this paper, we study the extent to which observed deviations from normative principles of behavior in economic games are due to mistakes that people would like to correct. To this end, we conduct two separate experiments: one in the context of prisoner’s dilemma games and one in the context of public goods games. In both experiments, our participants evaluate two rules to make decisions that could be followed in such games. Rule 1 implies always implementing dominant strategies if there are any, which is arguably the strongest principle of rational behavior in game theory. Rule 2 involves implementing certain strategies that are superior in terms of payoffs for both players, allowing for more efficient outcomes. This rule can be intuitively appealing, but it does not correspond to any fundamental normative principles of game theory and can lead to violations of dominance. In this setting, participants do three things: 1) they decide whether they want to implement each rule to make decisions for them, 2) they play games with various payoffs, and 3) they are presented with all the inconsistencies between their rule preferences and their decisions in the games and are asked to reconsider them. Changes in game decisions that are made to align with Rule 1 (the normative rule) are considered indicative of mistakes. Decisions that still deviate from dominance after reconsideration are considered to be deviations due to preferences. In prisoner’s dilemma games, 31% of the initial choices violate dominance, and mistakes account for 21% of these deviations. In public goods games, 77% of the initial choices violate dominance, and mistakes account for 4% of them. While a small proportion of deviations from normative behavior can be explained by mistakes, the majority cannot, suggesting that systematic behavioral principles primarily drive deviations from the normative standard.